Yahoo Finance Those who invested in Alliance Data Systems (NYSE:ADS) a year ago are up 108%
Alliance Data Systems Corporation (NYSE:ADS) shareholders might be concerned after seeing the share price drop 17% in the last quarter. But that doesn't change the fact that the returns over the last year have been very strong. Like an eagle, the share price soared 106% in that time. So some might not be surprised to see the price retrace some. The real question is whether the business is trending in the right direction.
So let's assess the underlying fundamentals over the last 1 year and see if they've moved in lock-step with shareholder returns.
View our latest analysis for Alliance Data Systems
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the last year Alliance Data Systems grew its earnings per share (EPS) by 141%. This EPS growth is significantly higher than the 106% increase in the share price. So it seems like the market has cooled on Alliance Data Systems, despite the growth. Interesting. The caution is also evident in the lowish P/E ratio of 5.78.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Alliance Data Systems, it has a TSR of 108% for the last 1 year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's nice to see that Alliance Data Systems shareholders have received a total shareholder return of 108% over the last year. Of course, that includes the dividend. Notably the five-year annualised TSR loss of 9% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand Alliance Data Systems better, we need to consider many other factors. Even so, be aware that Alliance Data Systems is showing 4 warning signs in our investment analysis , and 2 of those are potentially serious...
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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